Equity fund DIF has announced the UK’s first bankable and unsubsidised co-located Power Purchase Agreement and optimisation agreement (hybrid PPA).
The milestone – supported by software and advisory business Pexapark – covers a 55MW solar farm and 40MW/80MWh battery storage system in Leighton Buzzard, Bedfordshire, providing clean energy and secured revenue across the solar and battery energy storage system over a 10-year term. The market-first hybrid PPA will also provide secure and bankable revenue streams for both the solar farm and storage system said Pexapark.
The new agreement comes off the back of massive growth in interest in the co-location of solar + storage projects in the UK said the company, as solar investors turn to batteries to maximise the value and flexibility of their assets in the post-subsidy market. It stated that 45% of all solar planning permissions submitted in the UK in the past two years have been for hybrid systems encompassing storage.
This trend is reflected in the wider European market, where, according to Pexapark’s recent survey data, 64% of renewable energy businesses are now seeking to introduce or increase the proportion of energy storage in their portfolios.
Over the past decade, PPAs have provided an important revenue stream and hedging mechanism for renewable energy developers and offtakers looking to trade in Europe’s post-subsidy markets. However, PPAs for co-located projects have remained difficult to agree on because of their complex operational usage profiles and contracting structures, the survey found, limiting options for financing solar hybrid pipelines.
By providing secure and bankable revenue streams, Pexapark said the DIF hybrid PPA provides a model for the wider market to follow in order to reach scale amid the broader energy transition across GB and the EU.
In particular, the company has pointed to the critical importance of combining high-level negotiating expertise and deep ‘quant’ analytics to structure and close future deals of this complexity. Working with seller DIF, Pexapark’s PPA Transaction advisory team was able to draw on the quantitative expertise of its Storage and Flexibility Desk to analyse expected revenues and risk exposure. This enabled Pexapark to determine an optimal PPA structure that encompasses the power generation and storage aspects of the project.
“We’d like to congratulate DIF on this pioneering PPA, which marks the first of its kind in the UK and Europe more widely,” said Pexapark director of storage & flexibility Brian Knowles. “The innovative nature of this agreement reflects our commitment to finding new PPA solutions for unsubsidised renewable energy developers and offtakers, with contracted revenues that offer attractive returns and low risk profiles for investors.”
PPA transaction advisory regional lead GB & Ireland Jack Rankin added: “We anticipate this deal will be the first of many, representing a turning point for the European sector in the deployment of bankable solar hybrid projects. In the long run, agreements like this will be essential for integrating high shares of intermittent renewable energy generation into the grid.”